337 U.S. 472 (1949), 390, Proper v. Clark

Docket Nº:No. 390
Citation:337 U.S. 472, 69 S.Ct. 1333, 93 L.Ed. 1480
Party Name:Proper v. Clark
Case Date:June 20, 1949
Court:United States Supreme Court
 
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Page 472

337 U.S. 472 (1949)

69 S.Ct. 1333, 93 L.Ed. 1480

Proper

v.

Clark

No. 390

United States Supreme Court

June 20, 1949

Argued March 28-29, 1949

CERTIORARI TO THE UNITED STATES COURT OF APPEALS

FOR THE SECOND CIRCUIT

Syllabus

Pursuant to § 5(b) of the Trading with the Enemy Act, as amended, the President promulgated Executive Order No. 8389 prohibiting certain transactions in property of nationals of certain foreign countries except when licensed by the Secretary of the Treasury. Two days before this was made applicable to Austria by Executive Order No. 8785, petitioner was designated by a New York court as temporary receiver of the assets of an Austrian national (AKM). The asset was a debt owed by the American Society of Composers, Authors and Publishers (ASCAP), and no license permitting its transfer was issued. After issuance of Executive order No. 8785, petitioner was designated permanent receiver. Subsequently, the Alien Property Custodian issued an order vesting in himself title to the claim of AKM against ASCAP.

Held: in a suit by the Custodian against petitioner and ASCAP, judgments were properly entered declaring that petitioner had no right, title, or interest in the claim and directing ASCAP to pay it to the Custodian. Pp. 474-493.

1. The Joint Resolution of May 7, 1940, amending § 5(b) of the Trading with the Enemy Act, and Executive Order No. 8389, issued April 10, 1940, put into effect a valid plan for control of the property covered by the Executive Order that prohibited any change of title to the property here involved by reason of the subsequent appointment of petitioner as permanent receiver. Pp. 476-486.

(a) The Joint Resolution of May 7, 1940, ratified Executive Order No. 8389, issued April 10, 1940, including the broad definition of "banking institution" as including "any person holding credits for others as a direct or incidental part of his business." P. 478-479.

(b) Not being defined, the term "credit," as used in the Trading with the Enemy Act, the Executive Orders and the regulations thereunder, is given its ordinary meaning of the obligation due on accounting between parties to transactions. P. 480.

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(c) Petitioner and ASCAP are "banking institutions" within the meaning of the definitions of that term in the Executive Orders and the prohibition against "transfers of credit between any banking institutions." Pp. 480-482.

(d) A transfer of the credit here involved from a liability owed by ASCAP to AKM to a liability owed by ASCAP to petitioner would violate the prohibition against "transfers of credit." P. 482.

(e) Although title to the claim in question had not been vested in the Custodian when petitioner was appointed permanent receiver, the Executive Orders prevented title from being transferred to petitioner, even by judicial action. Pp. 482-485.

(f) A different result is not required by the administrative interpretation of the Executive Orders. Pp. 485-486.

2. Under § 977-b of the New York Civil Practice Act, title to the claim did not pass to petitioner by virtue of his appointment as temporary receiver before issuance of Executive Order No. 8785. Pp. 486-492.

(a) Although the state statute is susceptible of varying interpretations and the point has not been ruled upon by the state courts, this Court accepts the reasonable interpretation given to it by the Federal District Court and Court of Appeals, which are skilled in the laws of New York. Pp. 486-489.

(b) This Court rejects petitioner's suggestion that a decision in the federal courts should be delayed until the courts of New York have settled the issue of state law. Pp. 489-492.

3. The federal courts were not precluded from adjudging the rights of the respective parties in this case on the ground that the property was in the hands of the state court by virtue of a state receivership. Pp. 492-493.

169 F.2d 324 affirmed.

In a suit by the Alien Property Custodian under § 17 of the Trading with the Enemy Act, a Federal District Court entered judgments declaring that a receiver appointed by a state court had no right, title, or interest in a debt owed to an Austrian national, and directing the debtor to pay the debt to the Custodian. 70 F.Supp. 202. The Court of Appeals affirmed. 169 F.2d 324. This Court granted certiorari, limited to two issues. 335 U.S. 902. Affirmed, p. 493.

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REED, J., lead opinion

MR. JUSTICE REED delivered the opinion of the Court.

The Alien Property Custodian1 on April 22, 1946, began this action under § 17 of the Trading with the Enemy Act in the United States District Court for the Southern District [69 S.Ct. 1336] of New York to obtain the payment, and a declaration of title in him as against the petitioner as receiver, of certain royalties owed by the American Society of Composers, Authors, and Publishers (ASCAP) to Staatlich Genehmigte Gesellschaft der Autoren, Komponisten, und Musikverleger (AKM), an Austrian association, pursuant to the provisions of vesting order No. 2097, Office of Alien Property Custodian, September 4, 1943, 8 F.R. 16463, whereby the Custodian had vested in himself title to certain property of AKM, specifically claims for royalties under copyrights for the performance of musical compositions. By contract, ASCAP had been authorized by AKM to license on royalty the use in this country of musical copyrights belonging to AKM. ASCAP and the petitioner, who is the state-appointed receiver of the royalties involved, were made defendants. The District Court, on motions for summary judgment or judgment on the pleadings, entered a judgment declaring

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that the petitioner had no right, title or interest in the claim in question, Markham v. Taylor, 70 F.Supp. 202, and later, a second judgment directing ASCAP to pay the debt to the Custodian. The United States Court of Appeals for the Second Circuit, on appeal by the petitioner,2 affirmed. Clark v. Propper, 169 F.2d 324.

The pertinent facts underlying this controversy are as follows: on June 12, 1941, on an ex parte application by a creditor of AKM, the New York Supreme Court appointed petitioner temporary receiver of that association, pursuant to § 977-b of the New York Civil Practice Act, which provides for the liquidation of the local assets of a foreign corporation when it has ceased to do business for one reason or another not here important. Proceedings under this Act are to enable claimants against the foreign corporation to secure payment of their claims by an equitable apportionment of the available assets. The order of appointment directed him

to take, receive, and reduce to his possession any and all assets . . . tangible and intangible, within the New York of the defendant [AKM], and hold the same until the further order of this Court.

On June 14, 1941, pursuant to § 5(b) of the Trading with the Enemy Act of 1917, 40 Stat. 411, 415, as amended,3 the President promulgated Executive Order No. 8785,4 a so-called freezing order, which prohibited certain transactions involving Austrian property except as they were specifically licensed by the Secretary of the Treasury. On July 29, 1941, petitioner, as receiver, began an action in the courts of New

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York against ASCAP to recover the royalties which it owed AKM.5 Its disposition is awaiting the outcome of this case. On September 29, 1941, petitioner, upon the default of AKM, was appointed permanent receiver of that association's assets. Thereafter followed the vesting order, September 4, 1943, and this suit, April 22, 1946.

Upon the limited grant of the petition for certiorari, 355 U.S. 902, the issues argued to this Court and now to be decided are whether the appointment of petitioner as temporary receiver on June 12, 1941, or his appointment as permanent receiver on September 29, 1941, by relation back, passed title to him of the claim for royalties as of June 12, 1941. Furthermore, since, as will subsequently appear, we conclude these issues against petitioner, we must consider whether the freezing order barred a subsequent unlicensed judicial [69 S.Ct. 1337] transfer by the order appointing the petitioner permanent receiver.6

First. The appointment as permanent receiver on September 29, 1941, concededly would have vested in petitioner, as permanent receiver, all right, title, and interest of AKM in its claim against ASCAP if the freezing order of June 14, 1941, had not intervened after petitioner's appointment as temporary receiver on June 12, 1941.

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Accepting that position, the question of whether the appointment as permanent receiver related back to the date of the temporary receivership so as to place title to the claim in the permanent receiver as of June 12, 1941, and the question as to whether the appointment as permanent receiver itself vested title in the petitioner notwithstanding the prior freezing order, depend alike upon a determination as to whether the freezing order made invalid any subsequent transfer of title by judicial action.

The vesting order here in question, Vesting Order No. 2097, was executed on September 4, 1943, a date subsequent to the appointment of petitioner as permanent receiver. So far as the parties to this litigation are concerned, by its specific terms, it vested in the Custodian title to the property of AKM only.7 Nothing presented in this case calls our attention to any effort made by the Custodian to vest in himself any title to the claim that might be in the permanent receiver for the benefit of creditors and ultimately for AKM or those entitled to its assets on distribution,8 nor do we adjudicate

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his right to do so. The order, so far as is pertinent, vested in the Custodian "All . . . claim [of AKM to] all right to...

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